April 19, 2019

Colorado Court of Appeals: Claim Preclusion Bars Relitigation of Attorney Fee Issue in CDARA Case

The Colorado Court of Appeals issued its opinion in Layton Construction Co., Inc. v. Shaw Contract Flooring Services, Inc. on Thursday, October 20, 2016.

Summary Judgment—Claim Preclusion.

Layton Construction Co., Inc. (Layton) hired Shaw Contract Flooring Services, Inc. (Shaw) to perform work on a project for BCRE, the property owner. BCRE subsequently terminated its contract with Layton and gave Layton notice of numerous construction defects, a few of which related to Shaw’s work. Layton sued BCRE, alleging BCRE had failed to pay for work and seeking damages. BCRE counterclaimed for defective workmanship. Layton then added claims against various subcontractors, including Shaw.

Pursuant to a clause in the subcontract, Layton sought indemnification from Shaw for all damages and costs arising from any liability it might have to BCRE, including Shaw’s failure to provide a defense or pay Layton’s costs. Later, after BCRE specifically identified Shaw’s allegedly defective work, Layton moved to dismiss its indemnification claim against Shaw with prejudice. Layton’s motion stated the dismissal would include “those claims that have been or could have been asserted in this lawsuit.” The district court dismissed Layton’s claims with prejudice.

After a subsequent bench trial, the court entered an award for Layton on its claims against BCRE. The subcontractors remaining in the case were found liable to Layton under the indemnification provisions in their subcontracts.

Layton then filed this case against Shaw and other subcontractors, asserting claims for contractual and common law indemnity and declaratory judgment seeking an award of attorney fees, costs, and expenses it had incurred in defending BCRE’s claims in the prior case. Layton asserted the indemnification claim against Shaw under C.R.S. § 13-80-104 of the Construction Defect Action Reform Act (CDARA). Shaw moved for summary judgment, arguing Layton’s indemnification claims were barred by claim preclusion because they had been dismissed with prejudice. The district court granted the motion.

On appeal, the Court of Appeals noted that for a judicial proceeding to be precluded by a previous judgment, there must exist finality of the first judgment, identity of subject matter, identity of claims for relief, and identity or privity between parties to the actions.

Layton argued that its claims were not identical to those asserted against Shaw in the prior case. Because Layton could have asserted an indemnity claim for attorney fees and costs in the prior case there is identity of claims.

Layton also argued that CDARA modifies the doctrine of claim preclusion in the construction defect context by requiring splitting of indemnification claims. The Court found nothing in CDARA that abrogates the doctrine of claim preclusion in this case.

Layton further argued that various exceptions to the claim preclusion doctrine applied. The Court found that the exceptions to the doctrine of claim preclusion do not apply to this case.

Shaw requested attorney fees incurred on appeal, arguing that Layton’s appeal was substantially frivolous and vexatious. The Court agreed that the appeal was substantially frivolous and found that Layton’s assertion that it raised “novel” issues was “nothing more than a reflection of their futility.”

The judgment was affirmed and the case was remanded for the district court to determine the reasonable amount of Shaw’s attorney fees incurred on appeal.

Summary provided courtesy of The Colorado Lawyer.

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